Experts predict gradual relief for borrowers as inflation eases
Australia is likely to join other major economies in cutting interest rates in 2025, according to high-profile economist Stephen Koukoulas (pictured above right), who expects the Reserve Bank of Australia (RBA) to gradually reduce rates as inflation moderates and economic growth slows.
Speaking with mortgage industry veteran and Yellow Brick Road executive chairman Mark Bouris (pictured above left), Koukoulas noted that while immediate rate changes are unlikely, the RBA is expected to trim the cash rate by 50 to 100 basis points over the course of 2025, potentially lowering it to 3.35%.
“By 2025, inflation — whether measured by the trimmed mean or headline — will likely be within the RBA’s target range,” Koukoulas said in the latest episode of YBR’s Property Insights. “Unemployment will tick higher, and while the economy may show modest improvement, it won’t be booming. This opens the door for rate cuts, but nothing like the ultra-low levels we saw during the pandemic.”
The economist highlighted Australia’s tendency to lag behind global monetary trends, observing that the RBA initiated rate hikes in 2022 — approximately seven months after other central banks such as the US Federal Reserve and the Bank of England. Koukoulas predicted a similar delay in rate reductions, with other economies already starting to ease monetary policy by early 2024.
“The global pattern is clear: rates rose together, stabilised together, and are now starting to fall,” Koukoulas said. “Australia is just slightly behind the curve.”
As the RBA prepares for its final meeting of the year in December, Koukoulas noted the potential for greater transparency under bank governor Michele Bullock. She has hinted at the possibility of publishing individual board members’ votes, similar to practices in the US and in the UK.
“Transparency on voting records would give us valuable insights into which board members are hawkish or dovish and their reasoning,” Koukoulas said. “Healthy debate leads to better outcomes, and it’s essential for decision-makers to interpret the same data through different lenses.”
For mortgage brokers and borrowers, the prospect of rate cuts provides some relief after more than a year of sharp increases. While cuts are unlikely to bring rates back to the historic lows of 2020 to 2021, they could ease pressure on households and small businesses struggling with higher repayments.
“Borrowers can take comfort knowing relief is coming,” Koukoulas said. “The pace may be gradual, but the direction is clear — lower rates and reduced financial stress are on the horizon.”
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